RUSSIA MONITOR

Date: 17 December 2018

Russian Ultimatum: Lukashenko versus Moscow – pt. 1

The world community has recently witnessed yet another escalation of tension between Russia and Belarus. In response to Alexander Lukashenko’s expectation that Moscow would maintain the actual subsidizing of the Belarusian economy, Russian Prime Minister Dmitry Medvedev gave him a real ultimatum, under which economic aid will be maintained while Minsk must agree to unfreeze the two countries’ integration process within the Union State. If all the provisions of the 1999 deals are to be implemented, Belarus will basically risk the loss of its sovereignty. Such an ultimatum met with an extremely sharp reaction of the Belarusian President. In this context, a meeting between Russian and Belarusian leader, scheduled for December 25, may appear decisive.

SOURCE: KREMLIN.RU

In fact, Russia has financially backed the Belarusian economy since 1996. Each year, Minsk receives up to 10 billion dollars of Russian financial aid that takes forms of cheap gas supplies, duty-free oil products, open Russian market, military equipment, and loans. Without such substantial support, Belarus’s budget would be plunged in a permanent deficit. In the summer of this year, Russian authorities suddenly announced that aid for the Belarusian economy would be from now directly linked to Minsk’s readiness to develop the Union State, a supranational union consisting of Russia and Belarus. It is about the Agreement on Establishment of the Union State of Belarus and Russia, signed in 1999. Nonetheless, the integration process came to a standstill in 2007 while Moscow and Belarus discussed a possible currency union. There have begun nervous negotiations in maintaining subsidies for the Belarusian economy. Apparently, no progress has been made; during the summit of the Eurasian Economic Community in St. Petersburg on December 6, Lukashenko harshly criticized Russian President Vladimir Putin. The former claimed that Belarusian gas consumers were victims of discrimination. The following day, Lukashenko told Russian journalists that he had later apologized to the head of the Kremlin for his “poor condition” while publicly arguing about gas prices. The second contentious issue is Belarus’s loss emerging from the so-called tax maneuver in the Russian oil sector. In a consequence, Belarusian refineries will be obliged to pay a lot more for raw material. And yet the processing of cheap Russian oil for fuels, sold later to foreign markets at much higher prices, has long constituted a source of most important additional inflows to the state budget. The oil losses of Belarus could amount to 10.8 billion dollars by 2024, Lukashenko claimed. Furthermore, Belarusian President threatened to quit both the Union State and the Eurasian Economic Community.

Yet Moscow had no intention to made any concessions. On December 11, Russian Deputy Prime Minister Dmitry Kozak held a meeting with a Belarusian delegation. The Russian official refused to discuss compensation for losses from the tax maneuver and potential gas discounts. In this opinion, both states needed first to “make fundamental decisions on the further integration of Russia and Belarus within the framework of the Union State.”These were presented in the form of an ultimatum by Russia’s Prime Minister Dmitry Medvedev at the meeting of the Council of Ministers of the Union State in Brest. He suggested two variants; its “conservative” version excludes further development of the Union State while keeping the Eurasian Economic Community as main integration center. Under such an option, Minsk could no longer count on any preferences in its bilateral relations with Russia as all problems should be tackled within the framework of the EAEC. Speaking of the second scenario, it involves establishing one customs service and a court, which would be equivalent to pushing integration processes that were frozen back in 2007. Though Medvedev did not mention other provisions of the 1999 agreement, including one army, one central bank, and one president. Such state of affairs basically translates into Russia’s annexation of Belarus.

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